Exercise 15-21 Your answer is partially correct. Try again The outstanding capit

Question

Exercise 15-21 Your answer is partially correct. Try again The outstanding capital stock of Bonita Corporation consists of 2,000 shares of $100 par value, 7% preferred and 4,500 shares of $50 par value common Assuming that the company has retained earnings of $85,500, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions. (a) The preferred stock is noncumulative and nonparticipating. (Round answers to 0 decimal places, e.g. $38,487.) Preferred Common 4000 1500 (b) The preferred stock is cumulative and nonparticipating. (Round answers to 0 decimal places, e.g $38,487.) Preferred Common R2000) 3500 (c) The preferred stock is cumulative and participating. (Round the rate of participation to 4 decimal places, e.g. 1.4278%. Round answers to 0 decimal places, eg. $38,487.) Preferred Common 54824 30176

Explanation / Answer

(c) The preferred stock is cumulative and participating

1st: Preferred Dividend, 2 prior years = 2,000 shares x $100 par value x 7% dividend x 2 =$28,000
2nd: Preferred Dividend, this year = 2,000 shares x $100 par value x 7% dividend = $14,000
3rd: Common Dividend = 4,500 shares x $50 par value x7% dividend = $15,750

Remaining Payout = $85,500 - $28,000 - $14,000 - $15,750 = $27,750
4th: Participating Payout Preferred = $27,750 x ($200,000 ÷ $425,000) = $13,059
Common = $27,750 x ($225,000 ÷ $425,000) = $14,691

TOTAL Preferred Dividend = $28,000 + $14,000 + $13,059 = $55,059
TOTAL Common Dividend = $15,750 + $14,691 = $30,441

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.